Finance & Budget Committee recommends PPRT be applied to public safety pensions, forms subcommittee on investment rate and tables excess-reserve rule

The Evanston Finance & Budget Committee on Jan. 7 recommended that the city apply the maximum statutorily allowed Personal Property Replacement Tax (PPRT) to public safety pensions before other funding sources, with the motion including a temporary 11.3% reduction while the city’s potential liability to the library over PPRT is unresolved.

Council member Kelly, who backed using stable revenue streams for pensions, said the change reflects best practices: “I know that major credit rating agencies, Moody’s, S and P, Fitch, they all support dedicating a revenue stream such as this to this long term financial, commitment for this pension debt liability,” she said during the meeting. Staff cited guidance from the Illinois Department of Commerce that PPRT funds can be used first for public safety pensions, IMRF and related payroll liabilities.

The committee debated the proposal after a public commenter, Jack Mortel — a longtime Evanston resident and president of the Firefighters Pension Board — read language from the signed pension policy and urged clarity about when the city should raise a pension property-tax levy. Mortel said the publicly posted budget language omitted the policy qualifier that the council must raise the levy only if excess reserves are not available. “If there are not excess reserves available to make the full ADC, then and only then the city council shall raise a pension property tax levy,” Mortel read aloud.

During debate members discussed historical PPRT allocations (past small payments to the library and intermittent allocations to pensions) and the revenue’s volatility — staff noted PPRT receipts can range widely year to year and have been as high as nearly $7 million in a year. Several members said allocating volatile revenue to pension debt supports long-term stability and creditworthiness; others urged clarity and noted the PPRT amount would not by itself close the city’s pension funding gap.

The committee adopted amended language that inserts the word “potential” before the city’s library liability (a friendly amendment accepted during committee debate). The roll-call recorded the following votes on the amended language: Suffreddin Aye; Chao Aye; Kelly Aye; McGuire No; Livingston Aye; Newsomah Aye; Rogers Aye. The committee chair directed that the recommendation, as amended, move forward to the full city council.

Separately, on the broader pension-policy review (Resolution 45 R-23) the committee voted unanimously to establish a small subcommittee — composed of the actuary (Foster & Foster), the public-safety pension board presidents and one member of this committee — to meet and return a recommended investment rate-of-return assumption for the committee’s consideration. Members debated whether to keep the current 6.5% assumption (called conservative by some) or align with peer communities’ higher assumptions, and discussed the effect of a change on liabilities, required contributions and the present value of pension obligations.

The committee also voted unanimously to table a separate agenda item that would establish a policy on using excess reserves to meet the annual required contribution; the chair said staff should first provide a clearer definition of “excess reserves” and updated fund-balance numbers before the committee establishes that policy.

In a related discussion on fund-balance policy, members asked staff for more frequent reporting and a fund-by-fund breakdown (including encumbrances and assigned amounts) so the committee can distinguish restricted funds from amounts that are truly available. Staff noted audited fiscal-year numbers are finalized in June and recommended semiannual estimates that would be updated after audit.

The committee closed the meeting after approving minutes and agreeing to return the tabled matter and refined fund-balance details at the Feb. 4 meeting.